Luxury Buyers Drifted North, But the Tide May Be Turning
New data shows Sydney and Melbourne underperformed during the lifestyle-migration boom, but shifting price gaps suggest prestige buyers may be circling back.
3 min
Australia’s luxury housing map has been flipped on its head over the past five years, but the pendulum may finally be swinging back toward the big cities.
According to Ray White Group Senior Data Analyst Atom Go Tian, the pandemic years reshaped where prestige buyers put their money.
“If you were speaking about luxury houses five years ago, you wouldn’t even consider markets outside of Sydney and Melbourne,” he says.
But when COVID accelerated lifestyle migration and buyers were suddenly free to look elsewhere, the country’s wealthiest house hunters proved highly mobile.
“Luxury buyers proved themselves to be the most flexible and flocked away to where luxury was still sold at a discount,” Tian says. The result: Sydney and Melbourne were largely overlooked while regional prestige markets surged.
Both major cities saw their luxury prices spike briefly in 2021 as the COVID boom lifted the entire country, but the gains evaporated almost as quickly.
Rising interest rates and the lure of discounted luxury in the regions saw Sydney and Melbourne lose roughly half their 2021 uplift the following year.
The recovery since has been patchy. Tian says Sydney “grew six per cent between 2024 and 2025 after growing just two per cent between 2023 and 2024 to finally reach a new peak luxury price of $4.5 million”.
Melbourne, meanwhile, still hasn’t clawed back its pandemic peak. Luxury prices there rose five per cent between 2024 and 2025 after falling one per cent the year prior, ending 2025 at $2.6 million.
Over five years, the two major cities have been dwarfed by the east-coast lifestyle markets that stole their thunder. Sydney grew 35 per cent and Melbourne just 17 per cent.
Compare that with Brisbane (+77 per cent), Perth (+76 per cent), Adelaide (+73 per cent), the Gold Coast (+72 per cent), and the Sunshine Coast (+68 per cent).
That surge allowed the Sunshine Coast ($2.76 million) and Gold Coast ($2.86 million) to overtake Melbourne ($2.62 million) as the second and third most expensive luxury markets in the country.
Brisbane ($2.32 million) and Perth ($2.30 million) are now only 12 per cent cheaper than Melbourne, a huge shift from 2020 when both were 43 per cent cheaper.
Many assumed this decentralised luxury map was the new normal. But Tian says the last 12 months hint at a potential reversal.
“It’s easy to assume the new normal is a decentralised luxury market, but if the last 12 months signal what’s to come, luxury buyers may just be beginning to rediscover the value of Sydney’s prestige waterfront streets and Melbourne’s leafy inner suburbs.”
The price gaps that once tempted buyers north and west have narrowed. In 2020, Sydney was twice as expensive as the Gold Coast and Sunshine Coast.
Now the gap is closer to 1.5 times. Against Brisbane and Perth, the premium has shrunk from 2.5 times to 1.9. “Sydney’s premium looks more justified than overpriced,” Tian says.
Melbourne is a more complicated story. Its long lockdowns hit confidence harder than anywhere else, sending affluent buyers to other states. But Tian believes that weakness may now be its strength.
“At only 17 per cent growth over five years, it significantly underperformed relative to its fundamentals as Australia’s second-largest city.”
If interest rate cuts arrive and confidence lifts, he says the very buyers who abandoned Sydney and Melbourne could return to find relative value they haven’t seen in years.
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Strong population growth, major infrastructure spending and comparatively affordable property are expected to cement Melbourne’s position as Australia’s most attractive long-term real estate market.
2 min
Melbourne is poised to become Australia’s largest city within the next decade, with strong population growth, infrastructure investment and relative affordability driving long-term property demand.
A new research report from Knight Frank argues the Victorian capital remains one of the country’s most compelling markets for investors, businesses and residents.
The report highlights the city’s rapidly expanding population, diverse economy and major infrastructure pipeline as key factors underpinning future property growth.
Knight Frank Managing Director Victoria, Dominic Long, said Melbourne’s fundamentals continue to position the city strongly for long-term investment.
“Melbourne continues to stand out as one of Australia’s most compelling real estate markets,” he said.
“It is Australia’s strongest long-term growth city with the fastest growing population, the most diversified economy, world-class liveability and the most affordable major market for office, industrial and residential property.”
Population growth driving demand
Melbourne’s population has grown at an average rate of 1.8 per cent per year since 2000, faster than any advanced global economy, according to the research.
In the year to June 2025 alone, the city added about 123,500 residents, the largest annual increase of any Australian capital.
Population growth is expected to remain one of the key drivers of demand across residential and commercial property markets, including housing, offices and logistics space.
The report forecasts Melbourne’s population will overtake Sydney’s by the 2030s, reinforcing its position as the country’s fastest-growing major city.
Office market offering value
Melbourne’s CBD office market is also attracting renewed attention from investors.
Prime office rents remain significantly lower than in competing cities, with CBD office space about 46 per cent cheaper than Sydney and around 13 per cent cheaper than Brisbane.
That relative affordability is expected to drive long-term demand from occupiers and investors seeking value in Australia’s largest office markets.
The city’s office sector is also showing signs of recovery, with effective rents rising in 2025 and demand increasing for high-quality buildings in premium locations.
Industrial market benefiting from scale
Melbourne’s industrial sector continues to expand, supported by strong population growth, e-commerce demand and the scale of the city’s logistics network.
The city already hosts the country’s largest industrial market, with about 34 million square metres of warehousing stock and significant land available for future development.
Industrial rents remain competitive compared with other capitals, while Melbourne’s port handles the largest container volumes in Australia, further supporting demand for logistics space.
Infrastructure pipeline supporting growth
More than $200 billion in transport infrastructure investment between 2014 and 2036 is also expected to reshape the city and support future property values.
Major projects include the Metro Tunnel, the West Gate Tunnel, the North-East Link and the Suburban Rail Loop, which together will improve connectivity across Melbourne and its growth corridors.
Knight Frank’s Head of Research & Consulting, Victoria, Dr Tony McGough, said these investments would play a key role in supporting the city’s economic expansion.
“Melbourne is Australia’s most economically diverse city and has delivered stable growth for more than two decades,” he said.
“With strong population growth, a highly educated workforce and unprecedented infrastructure investment, Melbourne is well placed to remain one of Australia’s most attractive long-term property markets.”
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